Skip to main content

tv   In the Loop With Betty Liu  Bloomberg  December 16, 2014 8:00am-10:01am EST

8:00 am
global currency market. the fed kicks off its two-day meeting. the ruble down to 80 a dollar, record. global stocks are plunging. euro stocks down 1.5%. the nikkei was off to present. futures are also headed for another day of losses. president of the eurasia group, joining us in just a moment with why he says what is happening in russia is a geopolitical situation. it is less about the economy and the markets. interviewlusive with the wendy's ceo. it extends overseas and why it in theing mcdonald's united states. the russian ruble on a wild ride. it fell 23% against the dollar before bouncing back. the latest opponents began last night when the central bank boosted interest rates to stop
8:01 am
the ruble plus fall. almost 11% butd turned again, plunging to an all-time low of 79 to the dollar. oil resumed its plunge as well. -- west texas intermediate brent trading above 60, both of those five years. in sydney, australia, the hostage siege ended in a deadly shootout. the gunman was a self-proclaimed islamic eric -- cleric from iran. here is the us join prime australian- the prime minister, tony abbott. >> not only us in australia but tens of hundreds of millions of --ple around the world
8:02 am
sydney has been touched by terrorism for the first time in years. the man's former lawyer said it was unlikely he was involved in terrorism as part of a group. he was acting alone. in pakistan, and attack by the taliban on a school. 126 people killed, many of them students. a taliban spokesman said that the attack was in retaliation for the killing of taliban tribal members. and they take over in the oil business. -- of a takeover in the oil business. --all has agreed to buy repsol has agreed to buy talisman energy. they have been looking for an acquisition to boost oil reserves and production. relation from sony -- the energy and unit was approached about a financing offer -- and at him and you a financing offer believed to be linked to princes
8:03 am
in the middle east. sony is not commenting. no names attached to that story. let's get back to our main story, the plunging russian ruble. has been hit hard by economic sanctions and plunging oil prices. joining us is ian bremmer, president of the eurasia group from new york, and jonathan ferro with all the market action. in, you say that this is still a geopolitical story. what do you mean? >> what i mean is that the russian economies and free file -- is in freefall, largely because of oil prices and not sanctions. mr. putin is still over 80% approval and that is not because the economy is falling but because he has roped himself in his major geopolitical fight. he is in a position where maintaining sanctions and
8:04 am
scapegoats is not only useful but it may be seen as critical in this very dangerous period. the markets are looking for him to back down and work with the europeans and reduce sanctions. internally in russia, the absolute opposite logic is applying. you have seen so many political dangers percolating from russia in the course of the last weeks, from major cyberattacks and the near miss of a russian military jet with a commercial airliner. these are the kinds of things that will be much more dangerous in the coming days. , who would be his scapegoat? 9is medvedev in trouble? >> everyone is in trouble except putin. internally, region has been -- putin has been saying everything will be fine and meant the end the one whoev,
8:05 am
engaged with the russian reset with hillary clinton -- if i were the prime minister i would feel very uncomfortable. i suspect that vladimir putin will go after speculators, international marketeers, western companies, banks, people who are seen as stated by p -- by p as helping tout drive down the russian economy. sanctions have been painted by the kremlin darkly as an effort at -- directly at an effort at regime change. that will be the number one scapegoat. anyone who could be seen as a western eyes are within the kremlin or russians also cited will be on the back -- or russians of the society will be on the back foot. >> jonathan, on the markets itself, i have heard traders all morning long saying they have never seen anything like this. now talkingll, about capital controlled on the russian central bank. give me what you have seen this morning. the first one is to extend
8:06 am
what ian is saying that there is a question mark. it is even more stunning because this comes off the back of the back of a central bank that last night met and hike interest rates by 6.5 percentage points. despite that it bought a rally for the ruble for 1.5 hours. it was in freefall, stunning collapse. absolutely brutal. ian is talking about credibility and putin still having a high rating amongst the public. i'm not talking about the currency collapse, i'm talking about the russian people, consumers, businesses, those that got real exposure, they will be getting suffocated. think about this as well -- rates at 17%. that is going to suffocate the russian economy and it makes the recession next year look inevitable. >> what are traders telling you
8:07 am
about where there is a bottom here? is there a bottom with oil prices or the ruble? ,> the big question, betty is what is going on in the commodity markets as well. the stunning collapse not just with the ruble but the price of oil could you have brent i-59 dollars a barrel, -- you have brent at $59 ago, feeding into a weakening economy. you have declining inflation expectations, flight to quality. where does the money go? guess where it goes, to the german bond market. >> you see a lot of money flowing into gold as well. before we let you go, how is this going to impact other policymakers? how are we going to see europe and japan and the u.s. react here? >> obama right now is facing a
8:08 am
piece of legislation, additional sanctions that have been put on the russians by congress. he asked in the about whether or not he wants to veto that. on the one hand, letting it passed through his only putting more pressure on a russian economy that is really challenged and you don't want to put putin in a corner. on the other hand, does obama want to veto legislation and the path --sians they have completely sailed through every morning -- everyone from the white house. i think from the european side will have much stronger opposition across the board to additional sanctions on russian going forward. the europeans themselves in a much more challenging economic position. americans are much more exposed to russian economic collapse and the geopolitical expansion that tin.are seeing from pu this is a serious problem for the europeans. thank you, ian bremmer, as
8:09 am
well as jonathan ferro, who will stay with us on all the market action. back at home, u.s. treasuries are tumbling. we are seeing mixed interests overseas. china's holdings of u.s. debt held to a 20-month low in october while japan's prime minister shinzo abe has been buying up bills. mia saini is looking at the invitations for investors as we see the global turmoil accelerating. is the provider of this liquidity instrument t-bill and china and japan are the top holders. i want to show you a chart that shows the white line, china, and the yellow line, japan. both have been scooping up t-bills. on your screen, the middle of 2008, the financial crisis, what happened there is significant. china overtook japan to be the top holder at $1.25 trillion, compared to japan at one point
8:10 am
$2 trillion. usually these two lines on your screen mimic each other, but what has happened as of late is you have china reducing the amount of foreign holdings, while you have japan scooping up, buying more because they benomics.upport a >> the fact that china is reducing holdings in u.s. treasuries, what do we read into that? care? should investors the number one reason is the upside pressure to yield spread that could be a big problem. you see higher yields for higher mortgage rates and i could put the housing market in jeopardy to number three, destabilization of the bond market. today we have the fomc meeting. if they get rid of that key phrase, " considerable time," what does that mean? you could see a hike in interest rates around the corner and a bunch of these emerging-market central banks -- they don't want to bind the u.s. treasuries and that could create some type of panic. i did speak to an analyst. look,s. strategist said
8:11 am
this is no reason to panic right now. we don't have enough data to create a timeline. but the point is that china is not going to liquidate overnight but you should pay attention to what could happen in the coming months. >> china is reducing their exposure because why? >> the past couple months and cycles in china's economy, the growth has suffered. aey are looking to go towards consumption-driven economy rather than an export-driven one. when you have an export-driven one, they manage the currency downward. as of late they look to appreciate the currency. in october their currency appreciated against the u.s. dollar. the reason that is that china doesn't have to go in and intervene in the currency and essentially been on the -- essentially they don't need to buy u.s. treasuries. mia saini, bloomberg news. moving and shaking this hour, on a different note, the ceo of
8:12 am
.endy's, emil brolick a fast food revolution in the u.s. -- hit by protests and the rising cost of obamacare, wendy's is trying to stay about the issues of mcdonald's and burger king, which means staying out of the breakfast wars. i sat down with him and we will bring you the exclusive interview coming up. emil is trying to find a sweet spot between mcdonald's and chipotle. will 2016 be another clinton versus bush race in the white house? wouldld be if jeb bush make up his mind pretty seemed to give a bigger hand over the weekend. and we state focused on the markets. why the words "considerable time" might be a laced by "patients -- might be replaced by "patience."
8:13 am
8:14 am
8:15 am
>> jeb bush knows how to get the political world buzzing.
8:16 am
while the former florida governor still hasn't announced his 2016 candidacy, recent moves have the feel of a burgeoning campaign. greenr, bloomberg's josh and miles weiss reported that he has been extending his private equity business. will he jump into the race? joining us is phil mattingly, along with the foreign policy manager of mitt romney's presidential campaign. jeb bush seems to be sending mixed signals. he is making business moves, but on the other hand he is releasing 250,000 e-mails. >> if you look at his investment portfolio you would think there was no way he would run, and i was kind of the point of josh and miles -- that was kind of the point of josh and miles' story last week. there are three main steps. first off, he was going to release a trove of 250,000 e-mails from his time as florida governor. what will that do??
8:17 am
it allows them to get in front of any story that might occur during his time in office and for him to be known as the guy known for transparency. thatll lay out an e-book will layout policy positions, getting in front of the policy set of things, important for someone like jeb bush who plays -- who portrays himself as a conservative reformer. commencement address at the university of south carolina -- that is the first primary state that people think, based on the bush network, jeb bush could strike. you look at these moves he has made over the last four or five days and it really, really looks like he is about to get in. >> it does. the other point of people say, oh, he is going to run. apparently he has lost 15 pounds. he is going to be putting out an hisok that will lay out approach to governing. are think people around jeb
8:18 am
promising a different kind of campaign, one that will focus on letting jeb be jeb. that would be a strength if he is able to run on the issue portfolio as well is the positions he has come to be known for, and part of that is expanding the republican party and realizing that if it will win a national election it will speak to a whole bunch of new voters. able to run at campaign he will have to get in front of those issues early, as phil mentioned, with the book and other things. but also, he will have to stay true to that during the course of the campaign. >> phil, what could be in those e-mails? what is going to be interesting about them? thate interesting thing is there were people on social media talking about this who don't with him during his eight years in office where he would send e-mails criticizing reporters for some of the work they have done and staffers, correcting them on certain things. i think it will run the gamut. it will be really minor stuff that doesn't matter and it will also, most importantly, and i
8:19 am
think this is why it matters for a potential candidacy, it will give people a look at what he does behind the scenes as he is trying to make policy decisions. over his eight-year term in office, how he was deciding to get to the point on a specific issue. that is really instructive. a lot of times we don't get that behind the scenes view of a candidate. his willingness to put that are good benefit him in a major way. >> it could get what about the competitors, though? paul, eventie, rand mitt romney's talked about as a possible contender in 2016 again. what would competitors do if they know that jeb bush is going to run? series here. one is that the competition has to accelerate its own timeline, that if jeb announces early it will put pressure on them from a finance and political perspective to get moving quickly. the other school of thought is that people have to stick to their own timeline and 11 to do his own thing because there is a positive -- and allow jeb
8:20 am
to do his own thing because there is a rise and fall. others, like chris christie and rand paul, have their own timeline could they want us when they are ready and comfortable to do so. it doesn't really matter what governor bush does. >> phil, we mentioned before about that article in "bloomberg businessweek" that josh green wrote where he outlined the dealings that jeb bush has in private equity, particularly with this version holdings comedy. jeb was asked about it over the weekend and he said, "i'm not --amed." taking risks "taking risks and creating jobs is what we ought to do more of." do you think this would be a problem for jeb bush? >> if you talk to people inside the cap they say no. yes on public-sector things and private sector things and the could benefit him in a major way. what josh was pointing out in
8:21 am
his piece -- some of these investments and the way they are structured lend themselves to a number of different attack ads, particularly if you get to a general election against democrat. if you think a clinton candidacy can attack summary on corporate -- can attack summary else on corporate ties, you are nothing incorrectly. it could be an issue but i don't know if it is as big as an issue as the people are making it out to be. >> la hi, you are helping rick perry, -- aren't you? >> i'm happy to help anybody who is a serious contender for 2016. governor perry has done a great job getting up to speed on policy. governor christie has done great things than other contenders have as well. the field is yet developing . >> thank you, thanks to our white house correspondent phil mattingly. about going to tell you the new and latest acquisition ♪ to . ♪
8:22 am
8:23 am
8:24 am
8:25 am
>> you are watching "in the loop " on bloomberg television and streaming on mobile and intercontinental hotels group is going boutique. the owner of the holiday inn and crowne plaza brand has agreed to i hotels and restaurantsmpton more trouble for the casino operator caesars entertainment. sievers is skipping two under $25 million payment to junior creditors but it is talking to letters about restructuring debt at the biggest unit. wants to put the unit in
8:26 am
bankruptcy. plans to buy back $10 million of shares to pay out more cash to stockholders. this is the biggest u.s. seller of prescription drugs benefits -- benefits from the increasing number of americans with insurance coverage. cvs will raise the quarterly dividend by 27% to $.35 a share. it is 26 minutes past the hour, which means bloomberg television is "on the markets." what a market we have seen all over. gold is advancing, oil is plunging. equity futures are in the red. not as bad as what we saw overseas in europe and also in asia. down over two percent. as i mentioned with welcome we dropped below $50 a barrel. fall to continues to that is roiling the international markets and in particular in russia. as i mentioned, the ruble
8:27 am
falling to record lows. staying with the markets, i want to bring in drew manis, the deputy chief u.s. economist with ubs, who just upped his forecast for u.s. with 23.1% -- for u.s. growth to 3.1%. the fed will keep preparing investors for the eventual rate hike in the summer of 2015. drew, the fed will focus on the positives and put aside what we are seeing in russia and other parts of the world? >> the better question is this -- what can they do about it? if you think about the options the fed has available to it, they will choose the least worst option. if they choose to step back for moving towards the rate hike, that will weaken the dollar and it will put more pressure on overseas. the best thing they can do for the globe and the u.s. is to keep moving towards the rate cycle hire an expert some of the
8:28 am
u.s. growth. as we have heard from economists and other market watchers over and over again, if the u.s. continues on this path, and the rest of the world continues on another, you're going to see a huge diversions get even worse and that will introduce and even introduce even more volatility. said, not much alternative at this point. there are other central banks that are moving in the same direction we are. for the most part it is the banks that have actually gone the furthest in terms of adjusting their economies. the people who decided they can get away with it by doing giant stimulus packages or some other spending cuts, etc., didn't undertake any fundamental reforms, they are the ones you see doing worse. >> with the fed people are really watching what kind of language they might change in the policy statement. bloomberg survey group of
8:29 am
and 60% believe that the words "considerable time period" will be replaced by the word "patience." >> i'm not sure it will be replaced by anything. "considerable time" doesn't reference anything because it was related to quantitative easing, which is now gone. you go to the trading floors of most wall street firms, no one is listening to their economist's right now. >> are they listening to you, drew? >> no one is listening to anyone who has the word "research" in their title. between theig gap market consensus, surveys of economists, and what the market is pricing in. i'm listening to you i am listening to you, drew. >> i think they drop
8:30 am
"considerable time" because it references nothing and they have to get market expectations towards the idea of the june rate hike. in terms of their forecast, they forecasts. they've done it every other meeting and there no reasonably this would be different. >> we getting breaking news on the economy. housing starts just came out. 1.30 million housing starts for the month of november. that is a decline. scarlet fu at the breaking news desk has more. >> it looks like it is a disappointing read for housing. we have a 1.6% drop for the month of november. i was looking at a bloomberg story, and the economists recited talked about a potential november weather distortion and
8:31 am
perhaps that is what we are seeing playing out. building permits for the month of november dropping 5.2%, more than doubled the consensus estimate of a drop of 2.5%. the number of building permits that came in for the month of november is 1.035 billion. forave a disappointing read the u.s. economy as he had into day one of the fomc. >> drew, what is your take on these housing numbers? >> a little disappointing. we had a more optimistic outlook at ubs. it is very hard to start a home if you can't break ground. this is a problem for any sort of housing-related data outside of spring or summer, which is that it will always be distorted by weather and the seasonal effects are huge. this is an example of why when you are looking at housing, etc., look at the good months. don't look in the dark and cold months. >> is housing -- the market
8:32 am
itself overall pretty well positioned ahead of interest rate increases? they are going to absorb that pretty well? >> we have to look at one of the fundamental changes that has gone on, that clearly there is a skew towards renting rather than buying. things are going to be different in this recovery cycle and in this growth cycle, but different bad.n't always mean just because someone decides to that is aad of by, preference and there's nothing wrong with people choosing to rent rather than buying. >> drew matus of ubs, chief economist. staying on the consumer, fast food versus fast casual. which one is wendy's? we got an exclusive look inside the burger chain and sat down with the ceo to find how the
8:33 am
company staying ahead of the competition could with an hour to go until the opening bell, we are keeping an eye on all of today's action. the ruble's trading at a record low against the dollar. the oil is dropping below $62 a barrel with a brand futures also pointing in the red. ♪
8:34 am
8:35 am
8:36 am
>> let's take a break, guys. let's go back in time and remember this. >> fluffy bun. >> where's the beef ?" >> ah, you got to love her, right? the iconic wendy's marshall that shows -- iconic wendy's commercial that shows what the company sells, real beef. they say now more than ever their focus on fresh beef and ingredients is what keeps them a cut above fast food chains like
8:37 am
mcdonald's but priced below chipotle. it has six conservative orders of sales gains while mcdonald's is in its worst slump in a decade. i sat down for some burgers with the wendy's ceo, emil brolick. eimil, we are going to eat now. >> absolutely. >> let's bring in the food. wow. >> there is the hero of the show. >> what are we looking at here? >> this is our current promotion, the bacon portobello melt on a genuine brioche bun, and the chicken club, fantastic sandwich, and the day's hot juicy single, and our chili, what we are known for. >> and your salad. shew chicken salad, fantastic selling. >> what is your top seller?
8:38 am
>> chili is a very, very popular item. ranch chicken club is very popular. juicy is one of the top sellers through our history. >> this pretzel bacon cheeseburger -- last year you introduced it? >> we did. we brought it back and you can still get it. >> oh, for me? what about the whole obesity debate in the immense system where they say don't eat red meat, don't eat fried foods, stay away from fast food restaurants, we want to be healthier. how do you, that? >> you know, betty, we believe that awareness is one of the most and port of things and that is why in our restaurants we infoall the nutritional available for people could put food is about taste and people want greatest in food and high-quality ingredients and
8:39 am
people are sensitive to that and we have the highest quality ingredients out there in any levels of restaurants. >> how do you fit between a fast casual place like japan lay and mcdonald's -- like chipotle and mcdonald's? >> we present an prints to -- and expense to the consumer where they get it at a competitive price. we feel we give people a premium experience. if you think of the context of the quick casuals, the new qsr's, where we are giving people a comparable experience is the quality of the food but at a significantly lower price. our abhishek is 40 or 4 -- our average check is 40 or 45% lower than -- panera.chipotle or people are interested in the quality of the food and they have turned away from fast food.
8:40 am
you must be aware of the fast food hate that is going on in the country. >> when you look at the magnitude of the business in the united states, the number of people that hate fast food is a small group of people. >> a loud but small group of people, perhaps. >> that is certainly true. quick serve restaurants in general employed 11% of the u.s. workforce. this is a tremendous opportunity, we believe, for people to get their careers started. >> as you have been going more premium, is there any concern that there is a portion of your customer base who enjoys having the dollar menu, who enjoys having the value meal, that they may get turned away and say "this is to premium for me, i will go to burger king or mcdonald's"? strategy ishy our so important to us, because the last thing we want to do is turn
8:41 am
away that group of consumers. we know there are a lot of people -- as you look of the united states, we know that household income over the past 10 years hasn't grown in real terms and you have to be sensitive to that. have ayou couldn't business nowadays that is viable serving just the low-end customer, right? restaurantsnal qsr that would be extreme a difficult. i was a that if you think about a walmart strategy, i don't think there is a walmart strategy that applies to the quick serve restaurant business. >> what do you mean? >> walmart is an unbelievable organization and they have built a massive, very successful business by selling branded products at the very lowest price out there and have done a phenomenal job of doing that. but we are a brand. we are about high-quality products that you have to be able to have a range of price points, but we are not a niche business could we have 6500
8:42 am
restaurants. you have to be able to appeal to a wide range of consumers. >> you can't fight on price. betty, is our, goal is not to compete with competitors, but to compete with c -- compete for customers. >> for a deeper drive into the business strategy and becoming a fast casual, a different kind of fast casual restaurant, i want someone who focuses on the food industry at bloomberg. that food tasted good complex at i've got to ask, is this strategy going to work to hit the sweet spot between mcdonald's and to public -- and chipotle? >> one of the important makes you said was the h definitely important things he said was the high-low strategy could you have the millennial generation in
8:43 am
their 20's and early 30's who are for better ingredients and food trends as a whole are pushing people to look for better ingredients, more healthy options. as that increases, fast food restaurants have to respond to that as well. key to the high-lows that you need people coming in to buy your premium offerings but you also need to bring some of the value customers in the door, too, need to up sell them or at build the scale you need sms chain. -- you need as a mass chain. means higher i was surprised when he told me that they are able to offer the same kind of berger for 40-45% less than what you would get somewhere else. i'm wondering, how is he able to do that when you have seen beef prices continue to rise? >> they say that the prices will 2015ressure on them from
8:44 am
into 2016. that will challenge the strategy. but one of the things you have also seen this then investing in upgrading restaurants. part of creating the past casual feel in a fast food restaurant is creating the kind of restaurant where people kind of feel it is a little more hip than what they were used to over the years with fast food restaurants, it feels a little more comfortable. that is kind of part of the windowdressing that helps people feel like those products are more premium and they are willing to pay more, even if they really don't match up to some of the fast casual, some of the premium offerings of the other restaurants. some of it is just salesmanship. doingtrast what they are with so many new product introductions. i tried the pretzel cheeseburger. they had the asiago chicken sandwich. isy are adding items, this an attempt in mcdonald's said last week we are going to theuce the items -- reduce
8:45 am
items, we have too much innovation on our menu. >> wendy's is currently trying learly trying to say that we will compete for the value shoppers. we want people to come here instead of chipotle for instance, for them to feel like these sandwiches are closer to something you might find at a restaurant. that is where you get the pretzel bun burgers and those sorts of things. those are offerings you are going to see continued. they turned the pretzel bacon cheeseburger into a permanent offering, even though it is not clear that that is really doing as well as it was before. it will be interesting, as beef prices continue and they try to push forward with this strategy, whether they can sustain that long-term. >> i don't know what is up with the whole pretzel thing. i saw an ad for pretzel pizza crust. that is the next thing we will have to try.
8:46 am
>> pretzels are all the rage now. pretzel chips. >> thank you so much. we are going to stay with fast food could more problems for mcdonald's after the fast food chain severs and meet scare in china -- suffers a meat scare in china. it is forced to ration food in japan. back to the top story, the massive currency turmoil we're seeing is the russian ruble dives to a record low. we will give you updated as it continues to plunge. ♪
8:47 am
8:48 am
8:49 am
>> as we have been following all morning long, global markets following the russian ruble. what does this mean for vladimir and his leadership and those around him? i want to bring in ryan
8:50 am
chilcote, who covers russia for us from london. we spoke to ian bremmer of the eurasia group earlier and he said externally it looks like vladimir putin is on dangerous ground, that he is being pressured by economic sanctions. but internally, he still has a grip on the public. is this going to last long for him? >> that is exactly right. the question is, how long will that last? the depreciation of the ruble will shock russians, particularly with the last couple of days. by spring of next year, it will affect everyone, because russians are so dependent on imported goods to the president will be concerned about the depreciation of the ruble. he has very high ratings.
8:51 am
we are already even today is starting to see a bit of a fight for various people in the president past and her circle. people are blaming one another for the depreciation. >> is this going to make him back down from ukraine or sanctions? is this going to make him back down? >> if i knew the answer to that, i think the ukrainians would want to hear it. i think what we're seeing will give him pause. many russians short them off. shurgrugged them off. there is a crisis of confidence
8:52 am
in general with what the russian government is doing, and that my temper when he does in ukraine. >> the russian parliament will meet on thursday. what might we expect? >> i think the blame game will continue. we have the head of roast left russia's largest oil come to, blaming them as the political opposition and the former finance mr., who is still very close to the russian president, blaming them for criticizing a bond sale that rosneft carried out yesterday, calling it a provocation that rosneft may have been involved in depreciation of the ruble. we have talked that prime minister could be replaced. nobody's job is safe. them up thank you so much, ryan , our reporter who
8:53 am
covers london. we are about 30 minutes away from the opening bell. ♪\
8:54 am
8:55 am
8:56 am
6 minutes past the hour. disappointing for housing for the month of november.
8:57 am
8:58 am
8:59 am
9:00 am
>> welcome back to "in the loop ." here is a look at our top stories. futures indicate that stocks will be lower at the open. not only what is going on overseas, but the housing starts exceeded the one million a year pays for the third straight month and that hasn't happened in almost seven years. but it was below what economists estimated. the russian ruble has been on a will ride today. at one point it lost 23%, trading and a record 79 to the dollar. the ruble has rebounded since then. last night the russian central bank increased interest rates. oil prices keep dropping.
9:01 am
west texas intermediate dropped below $54 a barrel. the price is the lowest in more than five years. federal reserve policymakers will be watching oil in the markets as they begin their 2-day meeting. will they dropped the pledge to keep interest rates near zero four a considerable time? a majority of economists expect the fed to do exactly that. we are under 30 minutes way from the start of trading. chief markets correspondent scarlet fu and taking stock -- and "taking stock" host pimm fox joining me today. down,ber 10, futures are oil prices are lower, gold is advancing, and treasuries are up as well. all of this is making some economists and market watchers wonder if this is a repeat of 1998, when the asian financial
9:02 am
crisis was triggered by the devaluation of the cai bought. >> i've got to go back into my memory box for 1998. pre-9/11.e-y2k, my goodness. obviously, i have no idea, but i got this from john herman and mitsubishi, and one of the things he talks about his, all right, if you have people selling the ruble, which is what is happening, and emerging-market currencies, which is what is happening, look at places like brazil, what they do is they put their money into u.s. treasuries -- >> boardroom and burns. >-- four german bunds. >> what happens if it reaches a magical number like 2% on a 30 year mortgage? if you happen to be a borrower a look at a 30 have in your mortgage and someone says you might want to refinance -- would
9:03 am
you like a 3.5% mortgage? maybe it will not be that expensive to refinance. what is that due? it pushes down rates for greater demand -- >> so it could be net positive. >> for people who are borrowers. >> others wonder if we will see contagion. >> it is perhaps pretty deadly for fund managers. >> good point. another global story -- we are on fast food this morning. mcdonald's began rationing french fries. it is only offering small sized thech fries to customers as labor dispute has contributed to long delays of imports. it reminds me of the theory, if the butterfly flaps its wings -- -- the transit time of
9:04 am
frozen potatoes from japan to the west coast is now four weeks state of two weeks. they are only limiting you to small fries. but you can get as many small ties as you want to you can get around the problem. >> i guess these are good problems to have, right? if you are trying to sell french fries to the japanese market -- they are all closing, i would imagine. they don't make 0 -- they are all frozen, i would imagine. they don't make their own. >> mcdonald's just can't catch a break. if it is not the food scare, dispute,e, a labor minimum wage protests -- >> wrong menu offerings in the u.s. the provider of shared office space, closed with a $355 million funding round. it values the company at $5 billion in anybody heard of this
9:05 am
company? >> i've heard of the company but i've never used or seen -- >> they only have -- >> it reminds me of the regis businesses center concept that has been updated and remodeled and made more palatable to people -- >> they are not just subletting space out. they are creating an environment where people grow their own business and share ideas and the entrepreneurs. they are looking to expand that to living spaces. >> they want to up and the small business model. small businesses and how they located businesses. they sell number ships instead of -- i mean, this office space, but -- they sell office space, but access -- >> you have to be able to find a certain amount of square footage in arb buildings to attract the tenants. >> who are these tenants and how
9:06 am
long can the last? what is the credit worthiness? >> they are vulnerable to any kind of downturn. >> if they are paying in rubles, my goodness. >> apple just announced a dozen more banks like usaa, retailers, and startups -- among them td bank north america and commerzbank, some of the holdouts, the skeptics who said i'm not sure if i am buying into this apple hype. now they're finally saying -- >> you use paypal on a regular basis? >> i don't. >> i use cash, too. i happen to be a dinosaur. i'm the only one who carries cash. >> sometimes even a check. ok, that's really -- >> for large transactions you might not be able to use those things you can't walk around with $10,000 of cash.
9:07 am
which is, apple pay, had skeptics, it seems from everyone i have talked to is that it is going to be revolutionary for mobile payments and revolutionary for apple. >> made it more acceptable and mainstream. even google and soft card have said that this is a good thing overall. >> look at what it has done for fashion e-commerce. hackers known about trying to infiltrate its system for almost a year. the company has warned that cyber criminals were stealing gigabytes of data several times a week, underscoring a pattern of lapses predating the attack that have spilled the e-mails onto the front pages of every single tabloid newspaper. does it remind you some thing else? target. >> all of these countries will have to spend a lot more than the tens of millions they are spending on cyber security. spend about they don't
9:08 am
any money but just send out any melted the heads of all the business groups and tell people that you know, our systems in your e-mails are vulnerable, so please do not say or do anything that you would not want printed on the front page of a newspaper. >> there is also just in general whenever they are doing corporate-wise within the company. ceo's to go tow their boards and say i am going to put my money into security where they may have allocated the money to something -- >> too late for amy pascal. >> or scott rudin, for that matter. >> at least he hasn't run a company. michigan senator carl levin is joining us in just a moment. ♪
9:09 am
9:10 am
9:11 am
>> and we continue our countdown to the opening bell. we are halfway through. that means it is time for our
9:12 am
deep dive into the career of senator carl levin. after 36 years she is retiring from congress. -- he is retiring from congress. a stoxx defender of the auto industry and one of the wall street's biggest critics. he is standing by with peter cook for more on his time in his time in -- o the senate and when he leaves behind. >> we are pleased to be joined by chairman levin in our washington studios. your final days in the senate and you could be a lot of places. we are pleased you are here. what a lot of our audience knows you for coming to criticism of wall street. you have been trying to expose wrongdoing there and in corporate america. would it be surprising to you to hear that there are bankers in new york's elevating your departure? -- celebrating your departure? >> no, not at all.
9:13 am
there are some bankers we have worked closely with us so i am not going to stereotype all bankers, but some of the biggest in particular have taken actions which simply have not been held to our economy and we have tried -- not been helpful to our economy and we have tried to point that out. >> what is the most egregious things american banks are doing today that you think should be stopped? >> first of all, any conflict of interest. we wrote into the dodd-frank going which prohibitions of -- into the dodd-frank language prohibitions of conflicts of interest. a deep economic dive where mortgages went over, they were securitized by the banks, sold even though they , those was junk mortgages, sold to their own clients and that was reprehensible. right now we are looking at a situation where banks have been
9:14 am
told not to engage in risky proprietary trading, as we call it, because that could risk economic health, which means nd in a taxpayer bailout, which we have tried to stop in dodd-frank. third is that now they are just fighting -- many of them -- i don't want to stereotype, it is a mistake, but many of these banks are fighting against regulations to implement dodd-frank, and dodd-frank needs to be the moment -- implemented. >> how disappointed are you by the rollback of the derivatives rule? >> a very bad decision and the wrong way to do it, just dropping it in where nobody knows where it came from, but also, the substance is bad. the taxpayer will ultimately be called upon to bail out huge banks. but a lott yourself,
9:15 am
of other democrats are raising the question not only about that provision but what is happening on wall street, elizabeth warren among them. are we about to see with your departure from congress a battle between wall street writ large and democrats? fort good politically democrats to go after wall street? >> i think "politically" is not the right word. we ought to act not out of political motive but what is good for the economy. we have got to take actions to protect this economy to get job growth i and the right kinds of jobs and we have to go after conflicts of interest wherever they exist, we have got to close the unjustified tax loopholes which give people incentives to move jobs offshore, for instance, or shift revenues offshore. we have too many loopholes which should tax avoidance. we have recently uncovered any
9:16 am
area where some of the big banks, the biggest banks, are buying commodities, everything ,rom coal mines to oil tankers and in the case of goldman sachs, aluminum warehouses, where they actually control the amount of the premium which is paid to get at aluminum out of the warehouses, and that has an effect on manufacturers, people who use aluminum, on consumers. we cannot allow that kind of power to exist at any bank where they both have a control over part of the price -- >> in your final days here you have introduced legislation to prevent this from happening? >> with john mccain, bipartisan legislation. that is one of the hallmarks of that subcommittee. you can't allow that kind of conflict to exist where they are instance,bank, for owns so much of the aluminum and the warehouses, which determines the price for aluminum and the
9:17 am
same time they are engaging with nonpublic information that they have in financial transactions on wall street. >> let me ask you finally, you are leaving the congress and there are questions about the health of the democratic party right now looking into 2016. his hillary clinton the right person to carry the mantle forward for democrats? >> if she decides to run i will be there for her, but until then , that is not what i will be doing. i hope that she does run, but if she doesn't we will look for a different candidate. she will be a very, very strong candidate. i think she has the courage to call them as she sees them and not be bound by who it is that is interpreting -- that is contravening two campaigns. we have got to get away from the power of money in politics and she is able to do it and fight for things that she truly believes will help average people and help the economy. >> senator levin, after 36 years in the senate, appreciate it.
9:18 am
thank you for your service and appreciate you joining us here on bloomberg and i know you will look forward to time with your grandkids. >> we have six of them and we are rarin' to go. >> a long, storied career by senator carl levin, and chief washington correspondent peter cook. we will be back as we count you down to the open. ♪
9:19 am
9:20 am
9:21 am
>> welcome back to "in the loop ." let's get back to bringing you the most important stories you need to know before the bell. it has been a crazy markets day. senior markets correspondent scarlet fu joining me, "taking stock" host pimm fox as well. bitcoin, the virtual currency, has fallen more than oil this year, off more than 50%, trading
9:22 am
at $350. last year it reached our high -- remember this -- of $1100. we thought it was going to change the world. lots of other crypto currencies have popped up so there is more competition -- >> i just like the way you say "cryptocurrencies." draperno idea, but tim -- >> date that -- big bitcoin fan. >> clearly, this is not the end of bitcoin. fluctuation, nobody on the other side of that bit, but this is the beginning of all let stuff. >> and companies except bitcoin as payment -- 1800e 800 flowers -- accepts bitcoin as
9:23 am
payment. >> you would think that there would be some buying into bitcoin -- >> safety. shares arehree, ford falling after deutsche bank downgraded the automaker on concerns that the f1 50 pickup but game changer for ford will not be able to commended as premium prices because we're seeing lower gas prices could consumers might say nah, i will not pay extra for this fancy truck when gas prices are going below two dollars in parts of the country. >> have you ever heard of anybody saying that? "i don't want that brand-new truck that looks so great because oil is --" i mean, come on. >> know, this truck is supposed to be more fuel-efficient. it is supposed to save you money. >> but who goes out and says
9:24 am
nowadays -- >> there might be others. >> you think people go out and say "i want to burn as much energy as possible"? americans are smarter than that. not necessarily rb capital markets downgraded general motors because of general competition. >> let's stay with oil prices, all right, pimm? you know who is to blame for all this? do we blame opec? >> opec is blaming u.s. oil producers. >> everybody has to blame someone. >> enough blame to go around. >> apparently saudi arabia and iran are selling crude oil at cheaper and cheaper discounts because they are all competing. them all about market share. >> bloomberg television's "on the markets."
9:25 am
and it will get even uglier as we head towards the open. our top story and the opening bell is next. ♪
9:26 am
9:27 am
9:28 am
>> welcome back to "in the loop" and let's get to the stories you need to know before the opening bell. scarlet fu and pimm fox during me. number one, we have to talk russian, or we are to talk russia. the ruble has plunged to its lowest against the dollar. a record low after the russian central bank increases interest rates 6.5 percentage points. correct early this morning, we were at about 66, 67 through the morning. it progressively got worse on the russian ruble. it almost reached 80 before it reversed and stemmed the tide.
9:29 am
was there an intervention? that is a valid question. i don't know. prime minister medvedev said they would hold a meeting to discuss the feynman -- the information. >> he may be a victim in all of this. >> the russian oligarchs and all of those who have transferred their russian money into hard currency, or into london real estate, new york real estate, into art, they are thinking, you see, this is exactly what we did this. >> ryan chilcote had a great point where he said so many of the russians traveling overseas have already felt the impact of a weaker ruble. but soon, it will be felt within russia, because they buy a lot an important a lot. they will see inflation spike up. that will be big trouble for russia and vladimir putin. let's stay on russia and with this record drop of the ruble and the further drop in oil prices. i want to bring in the vice-chairman of the economic
9:30 am
energy research firm, ihs, and a blitzer prize-winning author and influential speaker on oil. dan, great to have you with us this morning. [opening bell] i know you are in beijing speaking about this whole dynamic here. you've said before energy is a commodity, and that we go up and down. it is a cyclical marketing. aree feel like the markets getting a bit over pennant over what is going on with oil? panicked over what is going on with oil? it because it will is trying to find its bottom and it looks like these prices are overshooting everything. , and there ismood nothing right now to stop it until either there is some geopolitical event that disrupts its or
9:31 am
you see some kind of political action to stop it. to myave said it calls 1998, but actually 1986. >> do you see that yourself? class i think there are things to watch. one is venezuela, and another is actually libya. or there is a highly uncertain situation in russia. it was only two weeks ago that president -- that vladimir putin said that they are watching what is happening between the ruble and oil prices and the sanctions that have passed. it looks like russia is not prepared for cataclysmic scenarios. >> you are in beijing right now attending a conference, and china has said to be one of the biggest beneficiaries of these lower oil prices.
9:32 am
what is china's take on the turmoil in russia? i wonder what the chinese leadership thinks of all of this. thehe chinese welcomed deals with russia, and i think they have it on terms very much that they wanted. but there is not a sense of great comradeship here. they've always been concerned about the possibility of a chaotic, disorderly situation in russia. i think probably what has happened there is like other people, that there is general disorder in the world market, and it's worrying them. china is a beneficiary from lower -- lower oil prices, as we were discussing today. they import 60% of their oil. but at the same time, there is recognition that one of the reasons for the week is of the weaknesss -- for the of the oil prices is this cooling down of demand in china.
9:33 am
reform,rocess partly of and partly trying to shift their economy. and just the kind of tepid nature, you can feel it here. the one of the reasons for falling oil prices. the demand that is expected to be here is not here. >> the demand is cooling down. we are, you said overshooting on the drop in oil. at what point did you feel we were starting to become excessive? >> i think if felt to me that we were sort of getting into -- as we were sort of getting into the 60's that this was now becoming disconnected from the economics. it is obviously the oil industry itself is in a shock. and for russia, you take that happening and then at the same
9:34 am
time the sanctions bill, which -- the congress could even have the u.s. sanctioning european companies who do business with russia. these two things coming together are just a terrible blow against the russian economy and against confidence in the ability to question whether they can manage their economy. and you mentioned inflation. that was already there when i was there not so long ago. russians were talking about how the falling ruble was really cutting their income. --slashiike flashing ng their income will stop >> if oil stays around $160 per barrel, who will make the most money out of this price collapse? -- based around $60 per barrel, who will make the most money out of this price collapse?
9:35 am
click the will have a wealth transfer -- >> you will have a wealth transfer from oil exporting company -- countries to oil importing countries. be americanary will retailers this holiday season, because more money in the pockets of motorist means more money in cash registers of retailers. in a sense, the u.s., which is the bright spot of the world economy as it is now at 50% growth, we may get more stimulus out of that. if it ends up that the u.s. -- and it could end up that the u.s. is the locomotive for the world economy. >> isn't there something we can do about this? opec could cut production, couldn't they? of resigned its job. it has gone out of business right now. because opec is not a unified organization. you have venezuela screaming for
9:36 am
cuts. you have iran screening for cuts. in the gulf producers are saying, we will not do that. we are not going to cuts or you can produce more or support higher cost oil. opec as a cohesive force is not there right now. they have just resigned. for the time being, but i think you will see something happen. it is pretty destabilizing for the world economy. > in the next couple of weeks? >> i was going to say months. sometimes new events get telescoped. but the winter wheat demand, turbulent spring, that is kind of what i would be looking for. >> the next meeting, i believe, is in may. >> yes, the official meeting, but they can always have an emergency meeting. then you have to get the other countries really agreed to cut, not just the gulf countries. dan juergens, thank you so much, the vice-chairman on ihs oil.
9:37 am
and in the global markets, it cannot going on right now. and we are deep in the red, down -- the dow down about 65 points. catch us up on overseas. >> risk aversion dominated the session, but let's not bury the story. you have a central bank that put up interest rates to 17%. and in fx market that turn around and laugh in his face. the stunning collapse of the ruble continued this morning. one dollar buying more and more rubles at session progressed. one, it's difficult to argue against calling this a currency crisis. -- andwo, have officials number two, have officials in russia completely lost control of the current? -- the currency? raises incted by 7% anyrest rates, and currency, whether the euro or
9:38 am
the dollar, will get that much smaller. carl brewer is taking an absolute kicking in today's session. the company is one third of its earnings from russia. they are being punished in the equity market today. >> jonathan, thank you so much. jonathan ferro on the global market. a quick check of how stocks are trading right now, the dow is off, the s&p and nasdaq, all in the red right now. the dow is down by about 71 points, hitting a low of the session. in the meantime, watch your back, ronald mcdonald. wendy's is ready for a faster flight. ♪
9:39 am
9:40 am
9:41 am
click on a different -- >> on a different note, one day you might be getting some different
9:42 am
than hashbrowns. when he is fading out breakfast. in thelready saturated market by countless others. still, the ceo emil brolick eye nues to i breakfast -- breakfast. >> we have tested breakfast several times over the years. we feel that the only large -- as the only large national chain that has not gotten into breakfast, it's difficult to get into that space today and commit the kind of marketing resources we feel would be nice very to entrench ourselves successfully. and by the way, do it in a way that we can not just break even, but make a good amount of money.
9:43 am
we want to make sure we can do it in a highly profitable basis. and we felt upon her last earnings that we were not quite there. >> he would not rule it out then? >> oh, no, but in the future we would do it in a way that really set us apart. but if you look at the growth in breakfast, it continues to be one of the strongest growing dayparts in quick serve restaurants. >> are the margins really hard to find in breakfast because there is a war going on? there is kind of a race to the bottom in many ways, you know, in pricing in breakfast. >> i don't really think that is the case. >> you don't think so. >> know, there is money to be made, but you have to be able to do volume. also, if you look at the morning dayparts, it is the most other ritual. we also find them -- the highest levels of loyalty with the morning customer. you get up in the morning and
9:44 am
you have a routine and you follow that routine. once you get embedded in that routine to make it harder to change people from that. but we did also want to have an effort against that to -- we did not want to have an effort against that to detract from our lunch or dinner business. we are not saying never, just not right now. that the lowest tier of the fast food space, the qs are as you call it, -- theqsr as you call it, that that will go away? no.k no -- >> you look at the number of households whose income has stagnated, you can find people in those categories where everybody in the household is working. in some cases, working multiple jobs. quick serve restaurants become extremely important to them as
9:45 am
their source of food for themselves as well as feeding their family. but because they use them with a high degree of frequency, price is very important to them. if not less important. the demand at these restaurants is very high. but what people are clearly telling you if they want to continue to have quality. quite are you for a higher minimum wage? -- >> are you for a higher minimum wage? >>ss we are very focused -- i am very focused on getting people opportunity. we do not look at it as a minimum wage. we wanted to advance from that stage. too, butant that, would you be ok with a higher starting wage? >> we believe in the free market system and the market determined price points. but again, the tremendous opportunity that we give people, if you come with a high school diploma and the success you can have an earn in a very short timeframe above average
9:46 am
household incomes, that is very special. i think the restaurant industry -- not just wendy's, but the restaurant industry deserves a huge pat on the back for this. >> you mentioned a call a few weeks ago speaking about obamacare and the important care act and the cost it will generate. can you quantify how that will affect your bottom line next year? >> we just finished the subscription timeframe for our health care, so we don't have that number, but we will have that in a month or so and have a better understanding of what that is. >> is it going to be significant? >> it is definitely a significant number for us. the other significant thing about this is that what we are going to find is the number of people who were able to take advantage of this are not as high as you may think. it will not be 90% of the people.
9:47 am
--ly because this program simply because this program did not provide the access to health care that people thought it did. >> for your business, will it prevents you -- maybe not prevent, but will it hold you back from being able to reinvest your cash? >> no,o, asked -- absolutely not. we have known for several years that this was coming and we built this into our planning process. you have to do this. so we are definitely doing it, but we will still be very aggressive about upgrading our restaurants and growing the business. absolutely focused on it. >> you can watch more of my interview with wendy's ceo emil brolick on your mobile device at or the free app. we continue to watch the russian ruble and oil prices and stock
9:48 am
down as we start to trade. don't go anywhere. ♪
9:49 am
9:50 am
9:51 am
>> we are almost a half an hour into the u.s. trading days so far. , but not thelower big route that we saw overseas. the s&p is off by about 0.2%. oil market, continuing to see a pretty big decline. crude oil is down over 2%, and rent is operating below that exceed dollar per barrel level. belowi crew has fallen wti crude has fallen below $55 per barrel. noticed the 2% that will be something the fed
9:52 am
watches as it meets today in their two-day policy meeting. will they be changing the language to perhaps "patient"? that could be the word that some economists are throwing out, coming out of the fed statement tomorrow. tomorrow on "the loop" as we bring in big guests. billionaire investor over ross and also don peebles. stay with bloomberg television as we continue to watch the markets. ♪
9:53 am
9:54 am
9:55 am
it is 56 the hour, and that means bloomberg television is on the market. i'm scarlet fu. 30 minutes into the u.s. trading day, we are watching volatility a cross asset classes. here in the u.s., the s&p 500 down for the six time in seven
9:56 am
days. modest declines right now, but still the losses since its record high on december 5, about 4.5%. interestingly, energy stocks are not the worst performers. toppled 20% ine the last few months. a lot of destruction there. 22% in the last few months. a lot of destruction there. the ruvell has tumbled in value against the dollar, weakening to 80 before settling down now to about 72. no signs whether opec producers will reduce output. and no price declines for treasuries. 9.2%erman bund got to before stepping back just a bit. here to discuss the selloff in emerging market bonds, lisa abramowicz. we will get to treasuries in a moment, but the route in
9:57 am
emerging market bonds is where i want to start. this will be a really interesting december. >> mark carney came out today saying he is concerned about contagion in emerging markets. there are a number of issues that are affecting emerging markets. you have venezuela bonds in a freefall right now stop russian bonds, clearly in the fall as well. -- in a freefall as well. right now, people are watching this saying, how much will this be a contagion effect? and what about places like mexico that have been a favorite of a lot of traders that are getting affected? bonds are also affected by the free llinoil pres. >> -- mexican bonds are also affected by the free falling oil prices. >> how much of a comparison do we have 21988? some -- do we have to 1988? there is more groundwork to be more stable, at least in the short term. true,k that is probably
9:58 am
but there are other factors that probably also make it different, but not for good reasons. all eyes are on the fed about what they will do. tomorrow when he comes out and give their announcement, -- when they come out and give their announcement, people will wonder if they are removing their considerable timeframe language, or hydrates -- hike rates. you are starting to see yields getting really choppy and people are finding yields elsewhere. why will they invest in an oral dependent economy that looks a little more fragile in a slowly growing global economy? >> it would be kind of tone deaf if the fomc did not at least acknowledge what is happening in places like russia. economyyou say the u.s. is completely sheltered when the market would indicate otherwise? couldon't see how they
9:59 am
not come out and a knowledge it anyway. and how with the market respond? would stocks rally if they were doubling down? -- with the market feel the fed is tone deaf? even yesterday in the treasury market, deals were plunging. you did not see that much trading relative to how much volaty y were seeing. a lot of questions about how in touch the fed is with the market right now. leslie will see, the customer at 2:00 is when the fomc comes out with a conference. we are back in 30 minutes. ♪
10:00 am
>> live from bloomberg headquarters in new york, this is "market makers" with erik schatzker and stephanie ruhle. >> cashing in on the oil slump, one hedge fund sees it as a buying opportunity for energy company bonds. we will be speaking with the one oak streetairman of capital, howard marks. >> and bitcoin gets battered, worth less than half of what it was at the start of the year. can the virtual currency make a comeback? >> bubbling over, what happens when vintage champagne meet the world of hip-hop. jay-z and ace of spades.


disc Borrow a DVD of this show
info Stream Only

Uploaded by TV Archive on